Mail Stop 3561
June 24, 2005
Mr. Ram Mukunda, President and CEO
India Globalization Capital, Inc.
4336 Montgomery Ave
Bethesda, Maryland 20814
Re: India Globalization Capital, Inc.
Registration Statement on Form S-1
Filed May 13, 2005
File No. 333-124942
Dear Mr. Mukunda:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
supplemental information so we may better understand your
disclosure.
After reviewing this information, we may or may not raise
additional
comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
General
1. Have you identified or been provided with the identity of, or
had
any indirect contact with potential acquisition candidates? In
addition, affirmatively state, if accurate, that neither the
company
nor any of its affiliates or representatives has, as of the date
of
the prospectus, taken steps towards locating or consummating a
business combination transaction. Currently, you disclose in the
MD&A section that you do not have any specific business
combination
under consideration and have not had any discussions with respect
to
such a transaction. If management, the directors, or any
affiliate,
agent or any other representative of the company has already taken
direct or indirect measures to locate a target business, or
unaffiliated sources have approached you with possible candidates,
you must disclose this information or advise us. We may have
further
comment.
2. We note the structure of this offering and its similarity to
numerous blank check offerings underwritten on a firm commitment
basis that recently have been registered with the Commission.
With a
view toward disclosure, identify for us supplementally the names
of
the companies that have registered or are seeking to register
blank
check offerings underwritten on a firm commitment basis in which
an
officer, director, affiliate, underwriter or attorney for any of
the
above have been involved; the Securities Act Form the companies`
filed on; if applicable, the date of effectiveness; and, the
status
of the offering thus far. In this regard, tell us the amount
escrowed to date and whether the blank checks have engaged in the
desired business combination outlined in the prospectus. To
assist
the staff in this regard, please present the information in a
tabular
format. We may have further comment.
3. Provide disclosure with respect to the redemption rights to
discuss the relative benefits and financial advantages to
utilization
of such feature between the existing stockholders and the public
stockholders. This disclosure should include, in part, an
analysis
and comparison of the financial consequences of the exercise of
the
redemption right when exercised by an existing stockholder as
compared to a public stockholder. In this context we note that:
(i)
the existing stockholders are allowed, and may make purchases of
shares in both the offering and in the open market subsequent to
the
offering; (ii) there appears to be a disincentive for public
stockholders to exercise their redemption rights due to the fact
that
the amount available to such stockholders (approximately $5.37 per
share) is virtually certain to be less than the purchase price
paid
for the unit in the offering ($6.00); and (iii) there does not
appear
to be a corresponding disincentive for existing stockholders to
exercise their redemption rights since their existing shares have
an
effective purchase price of $0.005 per share and thus even after
paying the offering price and/or market price for the other shares
acquired after the date of the prospectus, the effective cost to
the
existing stockholders of their shares will be significantly less
that
the redemption price of approximately $5.37 per share. Similar
disclosure should be provided, as applicable, with respect to the
shares held by the Underwriters. We may have further comment.
4. Provide disclosure in a prominent place in the prospectus
detailing the various fees, reimbursements and other cash flows
being
paid or eligible to be paid to the existing stockholders and/or
officers and directors in this offering. Such cash flows should
be
identified by type or source of cash flow, as well as the amount,
if
known. We may have further comment.
5. Please clarify with disclosure in an appropriate place whether
the
funds not held in trust could be used as a down payment or a
lockup
in a proposed business combination. To the extent they can,
explain
how ongoing expenses will be satisfied and include appropriate
line
item disclosure in the Use of Proceeds section identifying such
use.
In addition, to the extent the funds not held in trust could be
used
for such purpose, the summary and risk factor disclosure should
make
clear that in the event of a breach by the company, these
funds would be forfeited, the company would no longer be able to
conduct due diligence or other similar operations without
additional
financing, and that without additional financing, holders could
lose
on their investment in the units.
6. We note that your initial business combination must be with a
business with a fair market value of at least 80% of your net
assets
at the time of acquisition. Please clarify throughout that there
is
no limitation on your ability to raise funds privately or through
loans that would allow you to acquire a company with a fair market
value in any amount greater than 80% of your net assets at the
time
of acquisition. Disclose as well whether any such financing
arrangements have been entered into or contemplated with any third
parties to raise such additional funds through the sale of
securities
or otherwise.
7. Prior to the effectiveness of the company`s registration
statement, the staff requests that we be provided with a copy of
the
letter or call from the NASD that the NASD has no additional
concerns.
8. Prior to effectiveness please provide an update with respect to
those states in which the offering will be conducted.
9. Discuss in an appropriate place the company`s expectation as to
whether the current management will remain associated with the
company after the consummation of the business combination.
Detail
how the company intends to accomplish this, referencing the
necessary
transaction structure, valuation determinations, exchange ratios,
and
other contingencies which must be addressed and structured so as
to
ensure that the company`s management will be able to maintain its
position with the company post-business combination.
Cover page of Prospectus
10. Please revise the second paragraph to indicate the offering
price
per unit.
11. We note your disclosure here and elsewhere that the components
of
your units will begin trading separately 90 days after the
effectiveness of this registration statement "unless Ferris, Baker
Watts, Inc. determines that an earlier date is acceptable."
Please
revise to elaborate on the noted disclosure in an appropriate
place
in the prospectus. Discuss the factors that the underwriter will
consider in making the determination to allow earlier separate
trading. If the underwriter decides to allow separate trading
before
the end of 90 days, discuss how investors will become aware of the
acceleration.
Table of Contents
12. In light of the Rule 415 undertakings in Part II of the
registration statement, please revise or remove the statement
"[y]ou
should not assume that the information in this prospectus is
accurate
as of any date other than the date on the front of this
prospectus,
regardless of the time of delivery of this prospectus or of any
sale
of our securities." Additionally, revise the statement on the
back
cover page "the delivery of this prospectus will not, under any
circumstances create any implication that the information is
correct
as of any time subsequent to the date of this prospectus."
Prospectus Summary, page 1
13. We note that parts of the summary section and the business
section appear promotional, rather than factual, and should be
revised to remove all promotional statements. No speculative
information should be included, unless clearly labeled as the
opinion
of management of the company along with disclosure of the
reasonable
basis for such opinions or beliefs. For example, we note the
statement "[w]e further believe that we can buy a business that is
a
market sector leader, or can become one through an exposure to
foreign markets." Please provide reasonable support for the
promotional statements in the prospectus. If a reasonable basis
cannot be provided, the statements should be removed.
14. In the summary section and the business section, we note that
you
make several assertions regarding market conditions. Please
provide
us with reasonable support for the assertions and summarize the
support in the prospectus. If a third party is the source of the
information, please name the third party and the publication where
the information can be found. We note the following:
* "The Indian economy had a Gross Domestic Product in 2004 of
approximately $3.319 trillion and its growth rate in 2004 was
approximately 6.2%."
* "In addition, since mid-1991, the Indian government has
committed
itself to implementing an economic structural reform program with
the
objective of liberalizing India`s exchange and trade policies,
reducing the fiscal deficit, controlling inflation . . ."
* "A significant component of the program is the promotion of
foreign
investment in key areas of the economy . . ."
* "As a result, the regulatory environment for foreign investment
has
become more favorable."
* "Moreover, India has seen the benefits from the deregulation of
its
economy."
* "There are already a number of industry sectors that have been
deregulated . . ."
If you cannot provide us with adequate support for the assertions,
you should delete them.
15. We note your statement here and throughout the prospectus that
you will not proceed with a business combination if shareholders
owning 20% or more of the shares sold in this offering vote
against
the business combination and exercise their conversion rights.
Please revise to clarify that this is a two step process (first,
they
would have to vote against the combination, and second, they have
to
exercise their conversion rights) and that voting against the
combination alone will not result in a pro rata distribution of
the
trust fund.
16. We note that purchasers of your units will receive one share
of
common stock and two warrants, allowing them to purchase shares
(following a business combination) at the price of $5.00 per
share.
We also note that in order to convert and receive a portion of the
funds held in trust, only the shares are required to be returned.
Please revise to clarify if the warrants remain outstanding
following
an election to receive funds in the trust. This appears to create
an
opportunity for individuals to purchase units, remit the shares
allowing them to receive a portion of the trust, and benefit from
the
subsequent sale of the warrants they retain.
17. Please note, here or in another appropriate place, whether the
company plans to amend its 8-K filing to provide an audited
balance
sheet to reflect the exercise of the over-allotment option if such
exercise does not take place prior to the filing of the 8-K to
reflect the consummation of the offering.
18. Disclose here, and elsewhere as appropriate, whether the
redemption of the warrants by the company would include the
warrants
held by Ferris Baker Watts as a result of the exercise of the
Underwriters` option. Alternatively, if such warrants are not
included, discuss the reasons why such warrants are not included.
In
addition, discuss whether Ferris Baker Watts has the right to
consent
before the company can exercise its redemption right and if so,
discuss the conflicts of interest that result from such right.
19. Disclose, here or elsewhere as appropriate, the rationale for
requiring the stock to trade at $8.50 per share or more in order
for
the redemption rights to apply.
Risk Factors, page 7
20. Some of your risk factors are too broad and generic and should
be
revised to state the material risk that is specific to India
Globalization Capital. As a general rule, a risk factor is
probably
too generic if it is readily transferable to other offering
documents
or describes circumstances or factual situations that are equally
applicable to other similarly situated businesses. The following
risk factors should be revised, deleted or moved to another
section
of the prospectus as appropriate:
* "If we succeed in achieving our business objectives which is to
acquire one or more operating businesses with primary operations
in
India we may be subject to intense competition . . ."
* "Our obligations under laws, regulations and standards relating
to
corporate governance and public disclosure, including the
Sarbanes-
Oxley Act of 2002 . . . may increase our cost of completing a
business combination."
Risks associated with companies with primary operations in India,
page 16
21. In the first risk factor under this subsection, please provide
reasonable support for the assertions.
22. If applicable, please include risk factors discussing possible
risks when acquiring a business in India such as exchange controls
that affect the import or export of capital or remittance of
dividends and withholding tax issues.
Forward-Looking Statements, page 19
23. Please clarify to disclose that the safe harbors for forward-
looking statements included in the Securities Act and Securities
Exchange Act do not apply to statements made in your Form S-1.
24. Please remove the term "will" as an identifiable term for
forward-looking statements.
Use of Proceeds, page 20
25. We note that the company states that "[t]he proceeds held in
the
trust account may be used as consideration to pay the sellers of a
target business . . . Any amounts not paid as consideration to
the
sellers of the target business may be used to finance operations
of
the target business." Please discuss all possible uses of the
proceeds held in trust if such funds are released to the company.
Please include any finder`s fees and expenses that are in addition
to
those expenses to be paid from the net proceeds not held in trust.
Please reconcile this disclosure with the disclosure in the last
paragraph on page 25 in the MD&A section.
26. Please revise the parenthesizes in first sentence of the
second
paragraph on page 21.
27. We note that you have allocated $300,000 towards due diligence
of
prospective target companies. Considering current management will
not devote a set amount of time to your endeavors, please revise
to
discuss how due diligence will be performed and who will perform
it.
28. On page 21, we note the statement that "[n]o compensation of
any
kind . . . will be paid to any of our existing stockholders."
Please
reconcile this statement with the disclosure that "existing
stockholders will receive reimbursement for . . . performing due
diligence." Also, please explain whether the $300,000 allocated
to
due diligence in the table, would be used to pay existing
stockholders for their performance of due diligence.
Capitalization, page 22
29. The $100,000 in loans to stockholders that will be repaid with
offering proceeds should be included in the capitalization table.
Please revise.
Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 25
30. We note the statement "[w]e will use substantially all of the
net proceeds of this offering to acquire one or more operating
businesses, including identifying and evaluating prospective
acquisition candidates, selecting one or more operating
businesses,
and structuring, negotiating and consummating the business
combination." Please discuss whether or not these expenses will
be
paid from the proceeds held in trust. Please explain these
expenses
in more detail. It may be helpful to explain in greater detail
the
expected use of the proceeds held in trust.
Proposed Business, page 27
Introduction, page 27
31. Please provide a reasonable basis for the statement "[w]e
believe
that India presents fairly unique opportunities to acquire target
business because . . . in recent years, has undergone significant
deregulation of certain sectors of its economy."
Effecting a Business Combination, page 29
32. Under the subheading "We have not identified a target
business,"
we note the statement "[t]o date, we have not selected any target
business." Please expand this disclosure, if accurate, to
affirmatively confirm that no agent or representative of the
registrant has taken any measure, direct or indirect, to locate a
target business at any time, past or present. If any party,
affiliated or unaffiliated with the registrant, has approached you
with a possible candidate or candidates, then so disclose or
advise
the staff supplemental to your disclosure. Please note that, in
particular, we are not seeking simply whether a potential business
combination candidate has been "selected" but, rather, are looking
more to the type, nature and results to date of any and all
diligence, discussions, negotiations and/or other similar
activities
undertaken, whether directly by the registrant or an affiliate
thereof, or by an unrelated third party, with respect to a
business
combination transaction involving the registrant. We may have
further comment.
33. Under the subheading "Sources of target business," we note
that
Ferris, Baker Watts will serve as the company`s exclusive
financial
advisor in connection with a business combination. Please
describe
in detail the principal terms of the agreement and the services
that
the advisor will provide. We also note that Ferris, Baker Watts,
Inc. will be entitled to receive two percent of the consideration
associated with any business combination by the company. Please
include these fees in the Use of Proceeds section and in the MD&A
section.
34. Please discuss all fees that IGN, LLC could receive in
connection
with the business combination.
35. In the paragraph "Sources of target businesses," we note the
disclosure that unaffiliated sources will inform you of potential
target businesses and that such information will be either
"solicited
or unsolicited." Please revise to discuss how you will solicit
proposals and how unsolicited parties would become aware of your
search. Also, please revise to clarify if any unaffiliated
parities
providing proposals will receive a fee and how that fee would be
determined.
36. Under the heading "Selection of target businesses and
structuring
of a business combination," please clarify whether management or
the
advisor will perform the services described, including due
diligence.
37. Please expand the disclosure to state that none of the
existing
directors, officers, stockholder or special advisors will receive
payments out of the funds raised in this offering (or the funds
held
in trust) other than out of pocket expenses or performance for due
diligence.
38. It may be helpful to include a risk factor that the company
will
not be required to obtain an opinion from an unaffiliated,
independent investment banking firm as to the fair market value of
the target business.
39. In light of the company`s requirement that any acquisition
must
be of a company with a fair market value equal to at least 80% of
the
company`s net assets, discuss how the company would be able to
effectuate a business combination with more than one target
business.
In addition, add disclosure to discuss the special issues and
concerns that would arise in attempting to consummate the
acquisition
of several operating businesses at the same time.
40. We note the disclosure that the company will not pay any
finders
or consulting fees to the management or existing stockholders.
Please expand this disclosure, if accurate, to affirmatively
confirm
that management and the existing stockholders will receive no
finders
fees, consulting fees, or any similar type fees or other
compensation
from any other person or entity in connection with any business
combination involving the company or an affiliate thereof.
Employees, page 34
41. Given the disclosure regarding the amount of time management
will
devote, please revise to discuss in detail how management intends
to
carry out its duty of seeking a target business.
Management, page 38
42. Please disclose the period during which each person has served
as
a director, as required by Item 401(a) of Regulation S-K.
Certain Relationships and Related Transactions, page 40
Conflicts of Interest, page 40
43. On page 41, in the fifth paragraph, please clarify the
disclosure
to affirmatively state that existing stockholders are not required
to
vote any shares they hold which were not owned prior to the
offering
in accordance with the vote of the majority of the public
stockholders and that such shares may be voted either for or
against
the proposed business combination in the existing holder`s own
discretion. In addition, clarify, here and elsewhere as
appropriate,
that with respect to shares held by an existing stockholder which
were acquired after the offering (whether pursuant to the
offering,
pursuant to open market purchases, or pursuant to the exercise of
warrants) that the existing stockholder may vote against the
proposed
business combination and exercise his/her conversion rights in the
event that the
business combination transaction is approved by the requisite
number of stockholders.
44. Please expand to disclose the benefits that will or may be
received by related parties in connection with or following any
combination.
Principal Stockholders, page 36
45. Please clarify if the purpose of the disclosed purchases is to
stabilize the price of the warrants.
Description of Securities, page 45
46. In the disclosure under the heading "Shares Eligible for
Future
Sale," briefly discuss the "certain limited exceptions" pursuant
to
which the existing stockholder shares will be released from escrow
prior to the 6 month period provided for in the agreement.
Underwriting, page 49
47. Please confirm with respect to any electronic offer, sale or
distribution of the shares, if true, that the procedures you will
follow will be consistent with those previously described to and
cleared by the Office of Chief Counsel.
48. Tell us whether you or the underwriters have any arrangements
with a third party to host or access your preliminary prospectus
on
the Internet. If so, identify the party and the website, describe
the material terms of your agreement, and provide us with a copy
of
any written agreement. Provide us also with copies of all
information concerning your company or prospectus that has
appeared
on their website. Again, if you subsequently enter into any such
arrangements, promptly supplement your response.
49. Supplementally describe to us the mechanics of how and when
these
shares were or will be offered and sold to investors in the
directed
share program for this offering. For example, tell us how the
prospective recipients and number of reserved shares is
determined.
Tell us how and when the company and underwriter notified or will
notify the directed share investors, including the types of
communications used. Discuss the procedures these investors must
follow in order to purchase the offered securities, including how
and
when any communications are sent or received or funds are received
by
the underwriters or you. How do the procedures for the directed
share program differ from the procedures for the general offering
to
the public? Provide us with copies of all written communications
with prospective purchasers about the directed share program.
Regulatory Restrictions on Purchase of Securities, page 51
50. We note your disclosure that underwriters may make bids or
purchases in order to stabilize the market price, so long as the
bids
do not exceed a "specific maximum." Please revise to quantify
that
maximum.
51. We note your statement that the underwriters may make bids or
purchases for the purpose of pegging, fixing or maintaining the
price
of our securities. Supplementally, advise us how these
transactions
comply with Regulation M. We may have further comment.
Financial Statements
Note C - Proposed Offering, page F-8
52. Please revise to disclose the terms of the agreement to sell
Ferris, Baker, Watts, Inc. an option to purchase 1,500,000 units.
General
53. Your attention is directed to section 210.3-12 of Regulation
S-X
and the possible need for updated financial statements and related
disclosures.
54. You are reminded that a currently dated consent of the
independent accountants with typed signature should be included in
any amendment to the registration statement.
* * * * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested supplemental information.
Detailed cover letters greatly facilitate our review. Please
understand that we may have additional comments after reviewing
your
amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
Notwithstanding our comments, in the event the company
requests
acceleration of the effective date of the pending registration
statement, it should furnish a letter, at the time of such
request,
acknowledging that:
* should the Commission or the staff, acting pursuant to delegated
authority, declare the filing effective, it does not foreclose the
Commission from taking any action with respect to the filing;
* the action of the Commission or the staff, acting pursuant to
delegated authority, in declaring the filing effective, does not
relieve the company from its full responsibility for the adequacy
and
accuracy of the disclosure in the filing; and
* the company may not assert staff comments and the declaration of
effectiveness as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the
United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in connection with our review of
your
filing or in response to our comments on your filing.
We will consider a written request for acceleration of the
effective date of the registration statement as confirmation of
the
fact that those requesting acceleration are aware of their
respective
responsibilities under the Securities Act of 1933 and Securities
Exchange Act of 1934 as they relate to the proposed public
offering
of the securities specified in the above registration statement.
We
will act on the request and, pursuant to delegated authority,
grant
acceleration of the effective date.
We direct your attention to Rules 460 and 461 regarding
requesting acceleration of a registration statement. Please allow
adequate time after the filing of any amendment for further review
before submitting a request for acceleration. Please provide this
request at least two business days in advance of the requested
effective date.
You may contact Maureen Bauer at (202) 551-3237 or Terence
O`Brien at (202) 551-3355 if you have questions regarding comments
on
the financial statements and related matters. Please contact
Thomas
Kluck at (202) 551-3233 or Mike Karney, who supervised the review
of
your filing, at (202) 551-3847 with any other questions.
Sincerely,
John Reynolds, Assistant Director
Office of Emerging Growth Companies
cc: Michael Blount, Esq.
Fax: (312) 269-8869
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Mr. Ram Mukunda
India Globalization Capital, Inc.
June 24, 2005
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